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May 11, 2012

Employees Proactive, but Still Concerned: Financial Finesse

Survey finds employees are proactive about retirement, still worried about investments

Employees still have a long way to go in retirement preparation.

Although employees are still taking a proactive stance on retirement, market rebounds have done little to repair their confidence, research from Financial Finesse found.

Just 14% of employees who called the financial education provider’s helpline in the first quarter reported being confident in their ability to retire, down from 15% a year ago. Overall, employees continue to focus on long-term planning issues, a trend that began in the third quarter of 2009. Ninety-two percent of employees say they participate in their employer’s retirement plan.

Employees still “have a long way to go,” the report noted, in reaching their retirement goals. Not saving enough for retirement is the top vulnerability for employees who participate in financial wellness programs, Financial Finesse found. Saving overall is an area where employees need help. The second vulnerability, according to the report, is not saving enough to cover emergencies.

Although the stock market had its best first-quarter performance since 1998, with the S&P 500 up 12.6%, employees are still concerned about their portfolios. Just one-third of employees with investments said they are confident they’re allocated properly, relatively unchanged since the first quarter of 2011. Fewer employees have taken a risk assessment and are aware of where they fall on the risk spectrum: conservative, moderate or aggressive.

“No longer are employees relying on the market to give them strong returns,” Liz Davidson, CEO of Financial Finesse, said in a statement. “In a sense, they were burned by this way of thinking before—the market crashed and they lost huge portions of their savings.”

The European debt crisis, continued high levels of unemployment and rising health care costs are also weighing on employees' minds, Davidson said, adding that even though some in the industry say we’re in a recovery, employees don’t feel it. “They’re still waiting for the other shoe to drop,” she said.

“I think it will take a while for employees to increase their confidence about retirement and investing. We’ll need to see a much stronger recovery, along with sustained market gains. Maybe most importantly, they’ll need to see their older coworkers being able to retire en masse, at a reasonable age.”

Financial Finesse found that while employees’ financial wellness is still higher than it was during the recession—honestly, how could it not be?—it has slipped recently in a few key areas. In the first quarter, two-thirds of employees said they had a handle on their cash flow so they spent less than they make every month, down from 73% last year. Fewer employees are paying off their credit card balances in full, and fewer have an emergency fund to turn to if they lose their jobs. Last year, 88% of employees said they pay their bills on time every month. That fell to 85% in the first quarter of 2012.